On January 1, 2020 Wooldrik Inc. acquired 5,600 shares (with a par value of 500...

  

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On January 1, 2020 Wooldrik Inc. acquired 5,600 shares (with a par value of € 500 per share) of Leuriks Corporation. The consideration transferred for these shares exists of two parts: Wooldrik issues 2,800 new shares that have a par value of € 250 per share. On that date the total book value per share of Wooldrik is € 1,250 and the fair value per share is € 1,875; Wooldrik pays an additional amount of € 875 in cash for each purchased share of Leuriks. On January 1, 2020 the balance sheet of Leuriks shows the following accounts: Balance sheet Leuriks, January 1, 2017 (x € 1.000) Land and buildings 30,000 Common stock 10,000 Additional paid-in capital 4,500 Retained earnings 3,500 Long-term liabilities 2,000 Current liabilities 50,000 10,000 Equipment Inventory Accounts receivable 5,000 12,000 6,000 17,000 50,000 Cash At January 1, 2020, the fair value of the buildings is € 6,000,000 higher than the book value. The remaining life of those buildings is 15 years. The fair value of the accounts receivable of Leuriks is assessed to be € 300,000 lower than the book value. All of the other book values represent the fair values of the assets and liabilities. Leuriks generated net income of € 4,500,000 in 2020 and it paid a cash dividend of 10% of its common stock to its stockholders. By the end of 2020, from the point of view of Wooldrik, the accounts receivable of Leuriks are worth € 200,000 less than their book value. This lower value is taken into account for calculating the equity value of the investment in Leuriks. During 2020 Leuriks sold inventory with an original cost of € 500,000 to Wooldrik for € 600,000. Of this inventory € 150,000 (transfer price) was unsold to outsiders in 2020. Question 1 Is it likely that Wooldrik has significant influence over Leuriks? Explain your answer. Yes, it is likely to have significant influence over Leuriks, because I has more than 20% ownership. Question 2 Significant influence can be obtained in several ways. Give one of the ways that allow Wooldrik to have significant influence over Leuriks. Participation in the Leuriks policy making process Question 3 For January 1, 2020 compute the amount of goodwill that Wooldrik has paid for the investment in Leuriks. Question 4 Give the journal entry that Wooldrik has made on January 1, 2020 of the investment in Leuriks in its single accounts. On January 1, 2020 Wooldrik Inc. acquired 5,600 shares (with a par value of € 500 per share) of Leuriks Corporation. The consideration transferred for these shares exists of two parts: Wooldrik issues 2,800 new shares that have a par value of € 250 per share. On that date the total book value per share of Wooldrik is € 1,250 and the fair value per share is € 1,875; Wooldrik pays an additional amount of € 875 in cash for each purchased share of Leuriks. On January 1, 2020 the balance sheet of Leuriks shows the following accounts: Balance sheet Leuriks, January 1, 2017 (x € 1.000) Land and buildings 30,000 Common stock 10,000 Additional paid-in capital 4,500 Retained earnings 3,500 Long-term liabilities 2,000 Current liabilities 50,000 10,000 Equipment Inventory Accounts receivable 5,000 12,000 6,000 17,000 50,000 Cash At January 1, 2020, the fair value of the buildings is € 6,000,000 higher than the book value. The remaining life of those buildings is 15 years. The fair value of the accounts receivable of Leuriks is assessed to be € 300,000 lower than the book value. All of the other book values represent the fair values of the assets and liabilities. Leuriks generated net income of € 4,500,000 in 2020 and it paid a cash dividend of 10% of its common stock to its stockholders. By the end of 2020, from the point of view of Wooldrik, the accounts receivable of Leuriks are worth € 200,000 less than their book value. This lower value is taken into account for calculating the equity value of the investment in Leuriks. During 2020 Leuriks sold inventory with an original cost of € 500,000 to Wooldrik for € 600,000. Of this inventory € 150,000 (transfer price) was unsold to outsiders in 2020. Question 1 Is it likely that Wooldrik has significant influence over Leuriks? Explain your answer. Yes, it is likely to have significant influence over Leuriks, because I has more than 20% ownership. Question 2 Significant influence can be obtained in several ways. Give one of the ways that allow Wooldrik to have significant influence over Leuriks. Participation in the Leuriks policy making process Question 3 For January 1, 2020 compute the amount of goodwill that Wooldrik has paid for the investment in Leuriks. Question 4 Give the journal entry that Wooldrik has made on January 1, 2020 of the investment in Leuriks in its single accounts.

Answer rating: 100% (QA)

1 Yes Wooldrik has a significant influcene over Leuriks since ... View the full answer